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Today, nuclear power generates around 15 per cent of global electricity production; however, that percentage is likely to increase significantly over the next few decades as more and more nations turn to nuclear power to meet their energy demands.
According to the World Nuclear Association (WNA), the number of worldwide nuclear reactors will probably double by 2030. Currently, there are 435 plants operating around the world with 295 either under construction or in the initial approval stage and another 327 proposed.
The march toward nuclear power is expected to dramatically increase the demand for uranium over the long-term. Last year, a WNA report warned that nuclear power plants are facing future fuel supply constraints as the Megatons to Megawatts program comes to an end and enrichment facility construction lags.
While TradeTech sees uranium prices bouncing around between $40 and $60 per pound over the next two years, the consultancy firm anticipates prices possibly hitting above $80 a pound by early 2011 on supply disruptions.
Analysts expect uranium demand from utilities to stay low this year at around 4.5 million pounds, but put demand for 2011 at 18 million pounds, with China and India leading the way. As energy-hungry nations seek to secure their uranium supply lines, analysts predict international mergers and acquisitions in the uranium mining sector will increase.
"The key feature of worldwide uranium resource distribution is that a couple of countries own most of the world's uranium resources," said Nomura International Ltd analyst Ivan Lee. "Some countries with a large amount of nuclear power capacity are not endowed with rich uranium resources."
Nomura International pegs China, India, Russia and South Korea as the key players in uranium demand growth with Australia, Kazakhstan and Canada as the world's main suppliers.
China: Aggressively Securing Supply Lines
The WNA expects nuclear energy to take a much bigger role in supplying China's energy demands by 2030 and forecasts nuclear power production in the Asian nation to increase by 12 to 16 times its current levels.
According to Wu Yin, National Energy Administration deputy director, the Chinese government plans to make non-fossil energy 15 per cent of its total energy consumption by 2020 and some analysts say that level will require a minimum of 70 million kilowatts of nuclear power capacity.
China is already ramping up development of its nuclear power program by constructing 20 new nuclear power plants. "We forget that in France in the 1970s they were building five new reactors a year," says Steve Kidd, Director of Strategy & Research at WNA. "The Chinese are just doing what the French did, but on a Chinese scale."
China's state-owned nuclear giant China National Nuclear Corp (CNNC) has been actively scouring the globe for uranium supplies to match the country's growing energy needs. CNNC International, a subsidiary, is particularly concentrated on Kazakhstan, Mongolia, Namibia and Nigeria where uranium exploration is picking up steam.
CNNC International has recently entered agreements to acquire a 37.2 per cent stake in the Azelik uranium mine in Niger through a take-over of Ideal Mining Ltd for US$ 53.3 million.
Last year, CNNC acquired Canadian-owned Western Prospector Group Ltd. for US$ 25 million in a takeover bid, gaining access into Mongolia's burgeoning uranium mining industry.
CNNC's latest acquisition target centers in Mongolia as well. Monday, Khan Resources Inc [TSX: KRI] announced CNNC has outdone ARMZ's 65 cents a share all-cash takeover bid and has offered Khan shareholders 96 cents per share.
Unlike Khan management's reaction to the ARMZ bid, the Board of Directors has unanimously recommended shareholders accept CNNC's offer.
"The CNNC Offer is far superior to the unsolicited ARMZ bid," said Martin Quick, Khan President and CEO. "We look forward to working with CNNC to build upon the progress we have made in Mongolia towards establishing a stable platform for developing the Dornod uranium project and bringing it into operation. CNNC brings a lot to the table, with its deep expertise in nuclear energy, financial strength and strong political ties with Mongolia." The acquisition would give China access to the Dornod uranium deposit in Mongolia.
On Monday, shares in Khan Resources on the TSX closed at $1.00.
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